Care Home Construction Expenditure & Capital Allowances
In the commercial world where every care home owner needs to work and maximise their property assets, this may involve costly expenditure on new construction and extensions to existing buildings.
Existing for over 130 years capital allowances is the main method of providing tax relief against this expenditure. In an era where tax schemes are less palatable, utilisation of capital allowances on care home expenditure is frequently ignored or incorrectly claimed but does provide legitimate tax saving advantages.
It is often thought that capital allowances, being a tax issue, is a matter for the accountant. In reality it is often a property valuation or construction cost analysis issue best carried out by a specialist with the necessary skill-sets including a detailed understanding of construction technology and costs and a knowledge of M&E services.
With today’s varying methods of procurement, e.g. Design & Build, Cost/Functional Unit and Spec and Drawings there is often a lack of detailed cost information provided, even when buying a Turnkey Project it will most likely be based on £/bed to an agreed specification. Given this how can anyone without the necessary experience and knowledge of construction technology and costs be expected to assess and maximise a capital allowances claim for a new build care home.
There is often a lack of detailed cost information provided, even when buying a Turnkey Project it will most likely be based on £/bed to an agreed specification. Given this how can anyone without the necessary experience and knowledge of construction technology and costs be expected to assess and maximise a capital allowances claim for a new build care home.
As specialists, we have been brought in where a claim has failed with HMRC. We often see expenditure allocated to the wrong pool or simply not claimed at all. Careful consideration must be given to allocating the qualifying expenditure to the correct asset pool so as to ensure the correct and maximum write off of the assets. In every case we have been called in on we have enhanced not only the total claim but also allocated expenditure to the correct pool maximising the write down of the assets.
JexCA have recently analysed the construction or turnkey cost of 20+ care homes, achieving qualifying expenditure up to 45% of the build cost, excluding the loose ff&e.
On the recent construction of a 78 bed care home for £4.4m we identified £2.24m of qualifying expenditure providing a corporation tax saving of £405,000 of which the first year saving was £104,000.
To maximise the tax advantage on your construction expenditure, speak to specialist capital allowance consultants JexCA.
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This was written by Jonathan Jex of JexCA Ltd who have specialised in capital allowances on property and particularly care homes for over 28 years. Should you wish to discuss any of the issues this email raises or your own potential to claim capital allowances please contact Jonathan by email jpj@jexca.co.uk, telephone: 01622 815934 or visit www.jexca.co.uk
